UK can't afford to ignore trade war risks, says Bank governor - as Trump's tariffs cause global disruption and uncertainty
24 April 2025, 01:54
Andrew Bailey said the UK must take impact of trade wars on global economic growth 'very seriously'.
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At an Institute of International Finance event in Washington, the Governor of the Bank of England said the central bank is in the process of "working through" the ramifications of Donald Trump's tariff policies before the Bank of England's next rate-setting meeting, scheduled for May.
The remarks come as the International Monetary Fund (IMF) warned that global trade disruption and uncertainty related to the tariffs 'chaos' are expected to slow growth significantly in economies across the world in 2025.
The organisation said it is slashing its global growth forecast by 0.5 percentage points this year, with nearly all countries seeing a downgrade.
The latest World Economic Outlook report was produced under "exceptional circumstances", with the IMF being forced to change its projections after US President Donald Trump unveiled a range of new and higher tariffs earlier this month.
The UK economy is predicted to grow by 1.1% this year, 0.5 percentage points less than January's forecast, partly reflecting tariffs, as well as weaker consumption amid higher inflation driven by bills and energy price hikes.
Trump vs China: Who will win the trade war?
Responding to a question about US tariffs on Wednesday, Mr Bailey said: "We do have to take very seriously the risk to growth.
“Trade does support growth. Fragmenting the world economy will be bad for growth.
“The UK’s a very open economy and therefore it’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters here.
“When we do our modelling, we also have to take into consideration the effect of growth in the rest of the world.”
Mr Bailey also noted that "weak productivity growth" may have constrained economic growth in the UK since the financial crisis.
The Bank of England chief's comments come as Chancellor Rachel Reeves said the US is "keen do a deal with the UK" as she prepares for meeting her US counterpart for talks in Washington.
